Global Economy

Morgan Stanley Asks If This Is Just A "1937 Redux"

"Premature tightening of macro policies means risks of a relapse. In 1936, the Fed doubled the reserve requirements for banks and the Treasury began to sterilise gold inflows, slowing the growth of high-powered money. Fiscal policy was tightened, with the fiscal deficit narrowing significantly from 5.1% of GDP in 1936 to 0.1% in 1938. The premature and sharp pace of tightening of policies led to a double-dip in the economy, resulting in a relapse into recession and deflation in 1938."

Noam Chomsky On The Breakdown Of American Society & A World In Transition

The US is facing uncertain times. While it remains the only global superpower, it is no longer able to influence events and outcomes to its liking, at least not for the most part. Frustration and worry about the risk of upcoming disasters seem to far outweigh US voters' hopes for a more rational and just world order. Meanwhile, Noam Chomsky argues, the rise and popularity of Donald Trump is occurring due to the fact that US society is breaking down. In this exclusive interview with Truthout, Noam Chomsky addresses contemporary developments in both the United States and around the world and challenges prevailing views about class warfare, neoliberalism as the outcome of economic laws, the role of the US as a global power, the status of emerging economies and the power of the Israel Lobby.

Tensions Between US/NATO & Russia Are Flaring Dangerously

As if there weren’t enough crises to worry about in the world already, from shooting rampages to accelerating species loss, the US and NATO continue to ‘poke the bear’ and risk an outbreak of war with Russia.

Head Of India Central Bank Unexpectedly Announces Intention To Leave

The worst case outcome for many Indian investors came true this morning when head of the RBI said he would return to academia when his term ends on Sept. 4.  Rajan was generous in his parting words, saying government reforms, together with steps by regulators will lead to greater job growth, prosperity for our people. Rajan said that “I will, of course, always be available to serve my country when needed" and added that “I am confident my successor will take us to new heights with your help."

Weekend Reading: The Fed Loses Control (And What Comes Next)

The BEA has just announced they will trim 2% off of GDP next month. Of course, this explains why many of the numbers just “didn’t add up.” Importantly, the current decline in corporate profits and collapse in return on equity suggest the current economic backdrop is far weaker than currently reported. Next year’s negative revisions to GDP will reveal this to be the case and that a recession will likely have started in the latter half of this year.

A Common Central Bank Tool: Fearmongering

Central bankers should not be treated as wise oracles whose guidance is desperately needed. Instead, we should throw off the tyranny of the PhD’s and embrace the decentralization of power that is desperately needed to allow civilization to thrive. Brexit would be a great way to start.

In Furious Tirade, Citi Lashes Out At "Utterly Misguided" Central Bankers, Invokes Weimar Republic's Von Havenstein

"If ever there was a time to invoke the Havenstein experience, it is now.... We should be invoking Havenstein to identify the present flaw in institutional thinking around current monetary policy, specifically negative rates. In other words, the lesson here is that, unfortunately, people believed in the efficacy of a completely irrational policy because it was put in place by a qualified and experienced policymaker- this instead of questioning the common sense merit of its possible outcome."

Frontrunning: June 17

  • Sell-off abates as Brexit opinion seen shifting (Reuters)
  • IMF chief Lagarde says economic risks bigger if Britain leaves EU (Reuters)
  • U.S. State Department Officials Call for Strikes Against Syria’s Assad (WSJ)
  • St. Louis Fed's Bullard says U.S. may only need single rate hike for now (Reuters)
  • A Life of Violent Threats Paved Way for Orlando Attack (WSJ)